5/27/08

Morris Talansky, a U.S. businessman, entering the witness box in Jerusalem on Tuesday. Talansky testified that he handed cash-filled envelopes to Ehud Olmert when he was a minister and Jerusalem mayor. (Pool photo by Uriel Sinai)

JERUSALEM: The main witness in a corruption inquiry that threatens to topple Prime Minister Ehud Olmert made a dramatic courtroom appearance Tuesday, telling prosecutors that he had handed cash-stuffed envelopes to Olmert and an aide and saying that some of the money had gone to fund Olmert's fondness for fine hotels, first-class flights and luxury goods.

In sometimes emotional testimony, the witness, Morris Talansky, an American businessman, told the court that he had turned over about $150,000 to Olmert, directly and through political aides, at meetings in New York and Jerusalem over a 15-year period.

He said he believed that most of the money was for political campaigns, but that Olmert had also sought money for vacations and unidentified personal expenses.

Talansky, 75, said there were no records of how the money had been spent.

"I only know that he loved expensive cigars. I know he loved pens, watches. I found it strange," he said.

In one case, he said, he walked to a bank to withdraw thousands of dollars in cash as Olmert waited in a luxury hotel.

The police suspect that Olmert illicitly took as much as $500,000 from Talansky in illegal campaign contributions or bribes before becoming prime minister. Olmert has said the funds were legal campaign contributions and he has promised to step down if indicted. Talansky said in court that he had never received anything in return for the money.

The revelations Tuesday were likely to further hurt the already unpopular Olmert, who is trying to rally public support for peace efforts with the Palestinians and Syria. The investigation is the fifth that the police have opened into Olmert's affairs since he took office in 2006, and there is widespread speculation that he might not weather the latest charges.

Moshe Negbi, a legal affairs analyst, said that, according to Talansky's testimony, Olmert could face charges of bribery and breach of trust. He suggested that Olmert could be forced to resign by the attorney general even before any indictment.

"I don't think that there were ever such grave suspicions against a prime minister in Israel," Negbi said.

Olmert's downfall could dash U.S.-backed efforts by Israel and the Palestinians to work out a final peace agreement by the end of the year.

Talansky, who is not a suspect in the case, appeared nervous and stressed, breaking into tears twice in the packed courtroom. He took off his jacket and tie and drummed his fingers on a table.

Questioned in English, Talansky repeatedly voiced admiration for Olmert, and said he was drawn to the articulate, English-speaking politician when he was running for mayor of Jerusalem in the early 1990s. But he also expressed regret for some of their dealings - particularly the cash transactions.

Olmert had the "ability to reach out to the American people, the largest and richest community of Jews in the world," Talansky, who is Jewish, said. "That's why I supported the man. That's why I overlooked, frankly and honestly, a lot of things. I overlooked them. Maybe I shouldn't have."

During the questioning, Talansky said that much of the money had been raised in New York "parlor meetings," where Olmert would address American donors who would then leave contributions on their chairs. Some of the payments were meant to be loans, but not all were repaid, Talansky said.

In at least one case, Talansky said, he used his personal credit card to pay a $4,700 hotel bill for a three-day stay at the Ritz Carlton in Washington in 2004.

Olmert called him to say his own credit card was "maxed out," Talansky testified. "He asked if he could borrow my card, and he said it was part of a loan."

The donations took place before and during Olmert's 10-year tenure as Jerusalem mayor, which ended in 2003, and his subsequent term as trade minister. Olmert became prime minister in early 2006.

Throughout the period in question, Olmert was a leading politician in the hard-line Likud party. Among the donations was $30,000 for Olmert's failed 2002 campaign for Likud chairman. He said the money had been delivered in four checks in the names of Talansky, his wife, son and brother to skirt limits on contributions.

"I recall him telling me, you could only give him a maximum amount per person," Talansky said.

In late 2005, Olmert left Likud to help form the centrist Kadima Party, which he now leads.

Talansky described Olmert as a politician with magnetic appeal who greeted him with a big hug each time they met in Jerusalem.

"I had a very close relationship with him, but I wish to add at this time that the relationship of 15 years was purely of admiration," he added.

Talansky said Olmert had volunteered to contact three billionaires, including the owner of the Plaza Hotel in New York, Yitzhak Tshuva, and the Las Vegas casino mogul Sheldon Adelson, to try to drum up business for a hotel minibar venture run by Talansky. He said the offer did not help.

Adelson, the third-wealthiest American, according to Forbes magazine, was questioned in the case earlier this month during a visit to Jerusalem.

Talansky said Olmert's preference for cash raised his suspicions.

"Cash disturbed me. I couldn't understand it and I accepted the answer simply because I saw something bigger, hopefully, out there," he said, referring to what he believed was Olmert's potential.

Olmert also received several loans, including one of $25,000 to $30,000 for a trip to Italy and another for $15,000. Olmert asked for the second loan during a stay at the Regency Hotel in New York, insisting on cash, Talansky said.

Talansky said he had walked to a bank four blocks away and withdrawn the money. Olmert never paid him back, he said.

The last payment he made to "political Israel," he said, was about $72,500 for Olmert's Likud primary campaign in 2003. He said he had seen Olmert only once at a social function since Olmert became prime minister.

Because Olmert has not been indicted, the testimony Tuesday was not part of a formal court proceeding against him. Instead, the court was taking Talansky's testimony because he lives in the United States and the authorities are concerned that he might not return to Israel to testify in the future.

Olmert's lawyers tried to delay Talansky's testimony. But the American businessman, an ordained rabbi who has spent his career as a fund-raiser for Jewish causes, wanted to testify so he could return home to Long Island, New York. Talansky broke into tears, saying he missed his wife, when prosecutors told him he might have to remain in the country.

His lawyer, Jacques Chen, said Talansky would leave for the United States on Wednesday, after Olmert's defense team asked to put off the cross-examination so they could better prepare. Talansky promised in court to return.

Eli Zohar, a lawyer for Olmert, labeled Talansky's testimony "twisted" and said the truth would be revealed in the cross-examination, set for July 17.

After the hearing, State Attorney Moshe Lador said it was too early to make decisions.

The police have said the suspicions span a 12-year period when Olmert was mayor of Jerusalem and minister of industry and trade. Detectives have raided Jerusalem City Hall and the Trade Ministry and have questioned Olmert twice.

Olmert's longtime assistant, Shula Zaken, and a former law partner, Uri Messer, have also been questioned.